Wednesday, 16 May 2018

Graft under siege in Kenya?

  Corruption is becoming a dangerous business in Kenya! In the last two days, five people convicted of graft have been fined a total of Ksh 100 million (US$1 million) and sentenced to jail for a total of 20 years! That sounds like a clear deterrent if there was any.
 And if that is not deterrent enough, the entry of spies into the investigation of graft is a warning shot that the days of graft are running short. The spies, of the National Intelligence Service, NIS, are in the thick of investigations in the latest scam to hit the National Youth Service, NYS.
The department is said to have paid a whopping Kshs 9 billion, (US$90 million) to ghost suppliers in the last two years. This so soon after the then Cabinet Secretary for Devolution, Anne Waiguru, was hounded out of office over graft scam in the same department.
Waiguru was hounded out over an alleged loss of Kshs 791 million (US$7.9million). That ten times more was stolen after her departure is disturbing. It suggests that the thieves in the department were left untouched. Some reports suggest, that she was hounded out by corrupt cartels salivating for the loot in the department, which fell under her docket.
Top to Bottom: Kihara Kariuki, Noordin Haji,
 and George Kinot: Uhuru's graft Killer Squad?

Apparently, they had a field day. And this lends weight to the claim that she stood against the cartels which then resolved to hound her out of office. The people of her home county did not buy the crap about her corrupt deals, they elected Governor of Kirinyaga.

 Back to the sentencing. A former permanent secretary, a former City Clerk, a legal secretary and another senior officer in the former Nairobi City Council were today sentenced for their role in the purchase of a piece of rock for a cemetery. The last two were fined Ksh 52 million and Ksh 32 million respectively. The former two were fined a million each ($10,000).

 Yesterday, a former District Accountant was fined Ksh16.5 million( US$165,000) for stealing Kshs 3.8 million ($38,000) and four years in jail.

Anne Waiguru: Hounded out of
office by graft cartels?
 That the big fish are being sentenced on conviction must worry 
the small fish. They must fear that they are the next in line. They have cause to worry. With the sleuths in the thick of things, many heads will roll. These guys out ghost criminals and terrorists, Desktop thieves must be easy prey for they can be monitored both electronically and physically.

That it was not business as usual, was signaled when the former A-G, Githu Muigai suddenly resigned and was replaced by the President of the Court of Appeal Paul Kihara Kariuki, the former head of sleuths, Ndegwa Muhoro, was relieved of his duties in January and replaced by his Deputy, George Maingi  Kinoti.  The former Director of Public Prosecutions, Keriako Tobiko, was appointed Cabinet Secretary and replaced by another spy, Noordin Haji.

Apparently, President Kenyatta is determined to slay the ghost of graft and he wants men he can trust in place to help him slay it. He has in the past complained that graft has the capacity to destroy this country and to derail his "Big Four Agenda".

The Big Four is the legacy he wants to bequeath on Kenya as the legacy of his Presidency. He is therefore likely to be merciless with thieves. The National intelligence is said to have briefed the President about the loss of Ksh9 billion at NYS. The president then allowed the story to leak to the press.

So
a number of people must be having sleepless nights for they are staring at jail and bankruptcy. If the tempo is maintained, a number of senior and junior officials in the government, especially, the Treasury building and the NYS headquarters on Thika Road must be pretty worried.


Also worried are businessmen who supply air to the National Youth Service and get paid for it. They could lose everything they worked for or stole. And it is not only these, everyone who has a case pending at the anti-corruption court has cause to worry. The precedent has been set and their turn is coming soon.
 If the NYS scam is anything to go by, then, targeting Cabinet Secretaries and Permanent Secretaries is not enough, The battle musty slide lower persuing accountants, auditors procurement officers, and Clerks.

Monday, 14 May 2018

Illiteracy at its best

 Outer Ring Road, Nairobi: 
More road than the distance
 The level of ignorance by Politicians and journalists in East Africa on investment in the infrastructure sector is worrying. They mislead the public with their illiterate comments on matters they have a low understanding.
It is easy to point at their failure as deliberate misreporting. However, given the spread of the practice in East Africa, it is clear that the commentators lack the capacity to write technical reports, which makes their work worthless. Onn reporting on roads construction and costing they focus on the distance, ignoring the number of roads on the distance.
 A good example was the sustained criticism of Kenya’s Standard Gauge Railway project from Mombasa to Nairobi.  While it was condemned as the den of corruption, investigations established that the criticism was funded by corruption cartels through their friends in the equally corrupt media
.
A recent report in a Kenyan Daily over the actual length of paved roads in the country exposes this level vice.   The report quotes different numbers on paved road length wondering which is correct. As expected, the writer’s bent was the government has not built the alleged length of roads in the current Economic Survey which puts the length of paved roads built in the last five years at 6,000Km.  

Entebbe Expressway: 
Zooming over swamps
But a perusal of completed projects in Kenya by the three Roads Authorities, though woefully outdated, shows that roads measuring in length 2914 kilometers were completed by 2016. Another 1818 Kilometers were on-going. Given that the reports are almost three years old more roads must have been completed unless they tell us that no activity was going on since 2016. However, going by the figure 2914 Kilometers, assuming two-lane roads, we are talking about 5828 Kilometers of a road.
Considering that most urban roads are more than four-lane, this list understates the size of paved roads completed I the country from 2015. This list does not include roads we know to be complete and is being used such as the 12.3 Kilometer –Phase1 of the Ndogo Kudu bypass in Mombasa. The 12.3 Km section has 49.2 Kilometers of paved road, being a dual road. The 13-Kilometre Outer-ring road in Nairobi is an 8- lane -road meaning that the quantity of paved on that section is more than 100 kilometers, and is also complete.
This sort of misreporting has played a key role provoking disdain with which citizens here treat their governments.
Entebbe Expressway: 
difficult Terrain
 Last year, Uganda’s Parliamentary committee on statutory Enterprises, COSASE, kicked so much dust on the cost of constructing the Entebbe expressway branding it the most expensive roads in the world. They alleged that the road’s construction cost $9.3 million per kilometer and ordered a review of the costs.
Politicians and journalists could be forgiven for their ignorance but what about government audit units?
The Ugandan Controller and Auditor General also questioned the cost of the Entebbe Expressway saying it cost more than Ethiopia’s 88 KM Addis-Ababa –Adama -six-lane expressway.

The comparison was pedestrian, to say the least. It only looked at the products and their costs ignoring the land on which the product is built.  The land terrain is a major determinant of the cost of a road. Bridges load a larger cost on a road’s construction cost.
The Entebbe expressway crosses muddy swamps and therefore needed a lot of bridges. It boasts of 2.225 KM of bridges sitting on 240 pillars some as deep as 6-8 metres.  These costs exclude under-passes and interchanges.
 The moral here is, to audit any engineering project objectively, we must start with the detailed design of the project for that is where the devil is; where costing is done, contract components are defined and justified.

The detailed design also shows the physical features of the project area and what has to be constructed where. For example,

it shows intersections, bridges, overpasses, service roads, pedestrian paths, culverts, drains, climbing lanes, bus stops, etc. in case of roads.

Friday, 27 April 2018

How Creative destruction drove Kenya’s economic growth

How the Mobile Phone evolved
 Simply defined, creative destruction is innovation.  Innovation is introducing new and efficient technologies of production and also paradigm shifts in management thinking.  It is called creative destruction because innovation essentially causes adaptations that kill the old technologies or management styles.  Some products are consigned to the graveyard while new ones take their place.

 Kenya’s has experienced 20 years of creative destruction which has resulted in a rapid economic expansion.  The innovation was multipronged including technological advances, Paradigm shifts, Kenyans’ enterprise, and a shift in government policy focus.  The result; Kenya is the financial, ICT and transport hub of the eastern Africa region.

 Liberalization of the Kenyan economy in the 1980s and 1990s spawned a generation of aggressive entrepreneurs who brought to prominence the “Kadogo economy.” This is a paradigm shift in management thinking that embraced the low-income Kenyans as part of the market for their products.  
In a bid to break into a market that was firmly in the hands of branches of Multi-National Corporations, the Kadogos targeted the low-income groups with low priced, quality goods.  They produced the lowest quantity of their products aimed at the low-income consumer.

Even MNCS had to adopt 
Kadogo Economy
 Soon there were, in the market, low priced washing detergents and similar products and cheap but safe alcoholic drinks. Others followed suit and now we have 1.6 grams instant Coffee Sachets, 50 gram blue Band Sachets, 50-gram cooking fat packets and the like. Bottled then water was an imported novelty, available only in five- star hotels. The only natural fruit Juice we knew then, was South Africa’s CERES brand. Today local brands dominate the shelves and are available in 100 ML packages.  All are available at the local kiosks and are affordable.  
Woe to any Manufacturer or service provider who still looks at the low-income Kenyan as outside their market bracket. Fortunately, many local manufacturers and service providers have embraced this line of thinking and are smiling all the way to the bank.
This targeting of the low-income groups has enabled the local manufacturers and service providers to stand their ground against the onslaught by large Multinational corporations on the local market. In fact, local operators are even expanding where MNCs are shrinking or even abandoning the market altogether.
 This paradigm shift has catapulted Equity Bank into the largest bank in Africa in terms of accounts controlled. It is the thinking that catapulted Safaricom into the behemoth it is today.  Thanks to Kadogo Economy banking services are now available on the street corners and Keroche can compete with Kenya Breweries.

Versatility and adaptability is an innovation. Asked how they managed to grab a share of their Fast Moving Consumer Goods market in just about 10 years, the then BIDCO CEO, Vimal Shah, told this writer that the local firms made their decisions on their feet while the MNCs had to hold board meetings to decide.
The opening of the telecommunications market and the entry of the mobile telephony is the best thing that happened to this country.
SmartPhones: Powerful tools
Coupled with the entry of undersea fibre optic cables which raised internet speeds and lowered the cost of connectivity, it unleashed creativity among Kenyans, spawning new products that put Kenya on the World Map. The first off the blocks was MPESA, which enabled person to person money transfers. Soon traveling up-country to take money to relatives was so yesterday. One could transfer money relatives in a matter of seconds.
 Apart from ease of access-no application forms, no survey. Just walk into a kiosk, buy a handset and PIN card and initially, within a few hours you were connected- a proud phone owner. No frills. No bribes! And what’s more, they came in cheap.
The Mobile phone has mutated from just voice calls and SMS to internet connectivity that enables many more functions.  
 Then Banks followed; you could open a bank account from the streets, in a short while banking became a street affair as banks opened agencies in Kiosks. Those fancy banking halls were yesterday-ish. I visited my branch last a year ago to renew my visa card. Since then, I do my regular banking activities at a Kiosk in my neigbourhood or on my phone.  I guess long queues in banks at the end of the month are now history.
Equity Bank led in innovation in this sector. Apart from leading in hawking accounts on the streets, the bank, which mutated from an NBFI, in 2005 also led in setting up agencies among M-PESA agents perform withdrawals and receive cash deposits. This enabled Equity Bank to elbow Barclays and Standard Chartered out of the top perch. This was an innovation which brought many poorer sections of the population into the financial system.  Equity also led in the innovation setting up agencies along the Streets among M-Pesa agents to carry out banking services.
Do you have this at home?
 M-Pesa itself, developed by Safaricom, revolutionized money transfer and banking services.  MPESA, a first in the world, enabled Kenyans to transfer money among individuals, then save money, then it enabled person to business transactions, then Business to business.  We can also transfer money from our bank accounts to our Mobile Phones. And it is still developing.

More people can now save money on their Mobile phones which has increased the number of people with access to banking services. According to the communications authority, More than 90 percent of Kenyans are now banked, thanks to M- Pesa. The Authority reported that a total of Shs.1.659 trillion was transacted through M-PESA in the three months to September 2017. Of these Business transactions took Kshs 714 billion.

A KPT&C Phone booth. 
This is a Museum piece
 Do you remember when you last used a fixed line phone handset? It must have been decades ago in my case. How about those days of good old landline and telephone booths?  We could spend hours queuing in a telephone booth waiting for our turn to make a call.
 A telephone line on your desk in those days announced to all and sundry who was senior. Not anymore! These have been replaced by the all ubiquitous mobile telephone.  And that archaic fixed phone is no longer relevant in our lives.
Today, according to the Communications Commission of Kenya, mobile telephony has a 90 percent penetration rate while fixed lines reach only 0.16 percent of the population.

 These changes have seen Kenya’s GDP rise six-fold from US$12 billion in 1998 to US$75 billion at the end of 2017. Per capita income has risen from U$$400 in 1998 to $1,512 at the end of 2017.  This level of growth means that the Supply curve, economists say, was constantly shifting outwards, meaning that the basket of goods and services available to Kenyans was constantly growing larger as more goods were introduced.
The birth of M-Pesa has spawned the growth of financial techies that are offering small loans to customers through the Mobile phone. Kenyans now borrow small money from creditors through their mobile phones. And going by the number of lenders using this technology to lend, the banking industry is facing a major competition. Equity grew to where it is by targeting the unbankable- small savers and borrowers.
Old Thika Road:Era of 
Traffic Jams dissipating
In addition to Technological and Management paradigm shifts, is also the massive investment in business-enabling infrastructure. This also involves a paradigm shift from investing in political infrastructure to investing in production supporting infrastructure.

Infrastructure- roads, seaports, airports, and railway has assumed new importance in government thinking. Billions of shillings have been sunk into infrastructure developing improving efficiencies in product distribution and raw material imports.   There are more paved roads, more power generating capacity, larger airports, deeper seaports fast railway line. All these have helped improve the lives of Kenyans.

Monday, 9 April 2018

Kenya gearing for economic take-off


Dogo Kundu By-pass
Dogo Kundu by-pass phase 2&3, Lamu-Isiolo Highway, Second Runway at JKIA, the phase 2 Standard\gauge Railway, Thwake Dam…all gearing for construction this year and the next. At this rate, Kenya will soon look like a big Construction site. 
 Kenya is gearing for economic take-off “into a newly industrializing middle-income country providing quality life to all its citizens by 2030” says the long-term development strategy, Vision 2030.

 The construction of a string of mega-projects in key sectors of the economy worth billions of US dollars across the country will soon begin. Some are on-going and are nearing completion. Some are Greenfield, others are extensions of existing infrastructure. And some compliment already completed projects, improving their operational efficiency.  The projects are well distributed among such key sectors as transport, energy, ICT, and water. All have one thing in common, they are transformative in nature.
 Transformative infrastructure serves more than just its immediate functions.  They spark off productivity in existing sectors or enable new ones to come on board, shifting the production curve outwards.
For instance, the Second runway at Jomo Kenyatta International airport, will not only increase parking space, and increase the frequency of landings and take-offs from 25 to 45 aircrafts an hour, it will enable exporting sectors to reach a wider market.
Newly paved roads will not only cut the cost of travel and increase speed, they also open up new markets for both local produce and imports, lower, distribution costs and increase the speed of distribution of local products thus lowering consumer prices. They also cut down health costs and improve the balance of payments.
The US$ 620 million Lamu- Isiolo highway, for example, whose construction begins in the second half of this year, will traverse 10 towns in four counties. It is the first indication that Kenya is determined to implement LAPSSET, the US$23 billion project opening Northern Kenya which forms two-thirds of the country’s land mass, for exploitation to contribute to the nation’s wealth creation. Read http://eaers.blogspot.co.ke/2012/07/lapsset-biggest-business-venture-in.html
Both Isiolo and Lamu are also planning to develop resort cities as part of the Lapsset development but they, together with Turkana, are expected to grow into major energy cities. Several energy sources, including Oil and wind power, have been discovered in this region.  Read http://eaers.blogspot.co.ke/2012/04/awaiting-birth-energy-cities-in-kenyas.html
Also in the transport sector, the construction of the second phase of the Standard Gauge Railway from Nairobi- to Naivasha will be completed in September 2019, three months ahead of schedule. This follows the completion of Mombasa –Nairobi section which was completed 18 months ahead of schedule. A Special Economic Zone is also expected to be up and running by the same time in Naivasha.
The completion and lengthening of the SGR, coupled with the completion of investment in the ICD in Nairobi compliments the expansion and deepening of the Mombasa port that is nearing completion.  For more read: http://eaers.blogspot.co.ke/2013/07/kenya-ports-post-panamax-project-ahead.html
 The tender for the construction of the $350 million second runway at the Jomo Kenyatta International airport has been advertised. The runway will increase the movement of aircraft from 25 to 45 per hour and accommodate wide-bodied aircraft.  It will “enable direct intercontinental flights to North America and Australia. This is expected to increase access for Kenyan floricultural produce to new markets,” says the Africa Development Bank.
Ol Karia Geothermal station
 The construction of the runway will support the creation of an estimated 1.5 million jobs across the sectors and expansion of the economy by an additional $22.7 billion a year, the bank concludes. This is 30 percent of the current GDP estimated at US$75 billion.
Investment in green and renewable sources of energy generation increase power supply and lower costs of power. They also increase productivity in the economy as more manual activities are electrified. Among the sources is wind power, the largest of which is Lake Turkana wind project.
The Project is complete and awaiting the completion of Loiyangalan– Suswa 440KV power transmission in August to evacuate power from Lake Turkana Wind power farm. The 330 Mw facility, arguably the largest in Africa, will raise electricity supply by 20 percent of the current generating capacity and begin to lower costs of electricity as more Thermal generators are decommissioned.
 In the water sector, some 57 small and Mega-dams are at various stages of implementation across the country.  All are expected to be operational by the end of the current national development strategy, vision 2030.  Thirty of these will be completed by 2019 says the Water Ministry. “The idea is to increase the volume of water for irrigation and correct the blunders made in previous schemes, including the Galana-Kulalu Food Security Project. Its failure was blamed on inadequate water,” it said in an interview with a local daily.
Silicon savannah
Apart from enabling food production through irrigation, the larger dams will also generate power and introduce more economic activities in the project areas. Among the dams whose construction should start this year is the 27 story- high- 22 kilometre long Thwake Dam in Makueni and Kitui counties border. The project, the largest Multi-purpose dam in east Africa will transform an arid area into a bread basket.
In addition, the dam will support the growth of Konza ICT city and its environs. The city, arguably the first of its kind in Africa is located just 60Km Southwest of Nairobi, at Konza in Makueni country.
Dubbed the silicon Savannah of Africa, Konza ICT City is a greenfield project that will spearhead Africa's entry into the world of ICT-something similar to Silicon Valley in the US.  The city will be served by a high-speed Railway which is already complete. It is also fronted by the Mombasa –Highway which is being expanded to a six-lane expressway.   For more Read: http://eaers.blogspot.co.ke/2012/02/kenya-rearing-to-launch-ict-city.html
Generally, Kenya is gearing for take-off into the higher echelons of Middle-income country thus increasing not only the number
of goods and services available but also increase employment.
The construction of the projects is itself generating employment and increasing incomes across the country and among the drivers of the country’s robust economic growth.

The economy, the most diversified in the East African region has been robust over the last 16 years posting a GDP growth rate of 5 percent a year. In fact, the country has entered the lower ranks of Middle-income
country during this period. The country has become the Financial, Logistics, and ICT hub of the region.  The robust growth creates the right foundation for economic take-off.

Tuesday, 27 March 2018

Food security in Kenya: Feed the goose that lays the golden egg


Galana Kulalu: More large-scale
 Irrigation schemes needed
Expert reports show that Agriculture in Kenya generates 24 percent of the GDP directly, that is $18 billion at the current GDP estimated at US$75 billion. It also contributes another 27 percent indirectly to the GDP that is $20.25 billion.  In effect, the sector contributes, both directly and indirectly half of the national wealth that Is, $39 billion.
 The sector produces 62 percent of our exports, employs 40 percent of the entire labour force and 70 percent of the rural folk. It also generates an estimated 45 percent of Government revenue. The sector also produces over 75% of industrial raw materials and more than 50% of the export earnings.
Yet, says USAID in a report, the full potential of the land suitable for agriculture is not realized. USAID, estimates that only about 20 percent of the total land mass in Kenya is arable. Yet the full potential of this 20 percent is not achieved.
The bane of the agricultural sector in Kenya is the usual triumvirate- Rain-fed, lack of markets, low productivity. The result, so the argument goes food insecurity, malnutrition and widespread poverty in the rural areas. This has led to unrealistic approaches to improving food security and poverty alleviation in the rural areas.
The usual mantra being; allocate more to agriculture, train more extension officers, create markets, do more research in agriculture. At best these proposed solutions are isolationist, treating agriculture, the backbone of the Kenyan economy as an island.
The result has been; more blame game amid declining factor productivity in agriculture and growing numbers of feed. Food prices skyrocketed hitting the urban poor yet the rural folk are stuck in a poverty cycle. We have been suffocating the goose that lays the golden egg!
There is a positive correlation between productivity in agriculture and Gross domestic product (GNP) the measure of a country’s wealth creation. If agriculture thrives, wealth creation thrives. The reverse is also true: If agriculture shrinks, wealth creation shrinks too.
The sector so far gives more than it receives! Being the driver of the economy, it is the leading demander of goods and services produced in the country and also imports.
It therefore needs; good roads, water, electricity, Sea ports and Airports in addition to fertilizer, improved seeds and more extension workers. Support for the sector must be holistic.
In the past, infrastructure was designed to serve the urban economy: Water was extracted from the rural areas for drinking in urban areas and a little left for drinking by the rural households, none was set aside for agriculture, except for “kitchen gardening.” Electricity reached only cities “flying over” the rural areas while major roads had no designated markets for the rural folk.
More Multipurpose  dams needed
Without supporting infrastructure, the rural folk cut their losses by growing only what they need for their own consumption and a little to sell to buy sugar and salt.
The result high food prices in the urban sector, hitting the poor in urban areas hardest.
Time to change gears is now.  Agriculture must be the major driver in the design of infrastructure projects. Infrastructure design must of necessity include the needs of the rural folk. This, I think, is what is called inclusive development. Major trunk roads designs must include designated market slots tarmacked with parking bays -whether the market at the time exist or not. This is because roads create markets for goods. That is why hawkers are found at road bumps selling their wares, largely agricultural produce.
In addition, there is need to build all-weather roads linking the hinterlands to the major highways so that transporting farm produce to the market- whether local or to the cities- is cheap, fast, and reliable.
Roads: Not just expressways: Must
have designated markets spaces
 Official estimates put- post-harvest losses to 40 percent to of the produce. This is mainly because agricultural produce is perishable by nature and should reach the market in a short while. No good storage will maintain agricultural produce beyond its lifespan. Therefore ease of access to markets is the answer. This will motivate farmers to grow more for the market and less for subsistence.

 Further, there is need to process agricultural produce into value-added products whose shelf-life is longer. This means that the rural folk must be supplied with electricity to enable food processing in addition to other activities that support agriculture such as welding and other basic engineering activities. 
 And given the growing drought menace, water is no longer aplenty for the rural folk. Climate change is real and its time we changed tack.  We must turn to large-scale irrigated agriculture.
There is need to scale up investment in agriculture supporting infrastructure- Multipurpose dams, roads linking the rural area to urban areas, and connection to the national grid to enable the sector to drive the economy.
 These are massive investments running into billions of Dollars in sunk capital and they take years to complete. But this is the way to go. We must bite the bullet!

This is wasteful irrigation
Kenya’s the long-term development strategy, the Vision 2030, has jolted action in infrastructure development in the last 10 years or so. Newly paved roads both in urban and rural areas are being constructed and some are complete. New power generating capacity from various sources coming on stream and a large number of rural homes and institutions are being connected to the national grid.
At the moment there are 57 small and mega- dams at various stages of implementation across the country to store water for human and livestock consumption and irrigation.




 No resource is permanent, so the water must be conservatively used. Encouraging drip- technology to give plants the water they need without wasting it is the way to go. The technology is already available in the market. Drip technology for open field crops is being practiced at a small scale. The government should encourage large- scale drip irrigation in areas served by the dams. That way, it will ensure the resource is not wasted. 

Wednesday, 14 March 2018

The famous handshake: It’s economics, stupid!

Uhuru and Raila During the Handshake
If Anhui Construction Company of China bids and wins the contract for the construction of the proposed second runway at JKIA, then, Economics will be the real reason for the Uhuru-Raila amity.  The company was the winner of the bid to construct the now moribund US$656 million Greenfield terminal at JKIA.
And that project was one of the two mega projects that Jimmi Wanjigi had brokered, the other being the Standard Gauge Railway.  Both projects slipped through his fingers during the Uhuru Kenyatta administration, a loss that so angered him that he swore to bring down the Uhuru administration. He thus threw his weight -and finances- behind Raila Odinga’s ODM, becoming the financier.
 However, that was a bad gamble for all his efforts to bring down the Jubilee administration came to naught. And even as he funded “operation bring Jubilee down,” the administration was slowly tightening the noose around his neck.
For five years, he never brokered any significant deal, legally or otherwise. It was a prolonged drought for him. And since NASA- which he midwifed-never made it to State House, he faced another five years of drought-longer than even the biblical seven years of famine faced in Egypt during Joseph’s days.
 Raila, on the other hand, had promised Jimmi some lucrative contracts, worth some Kshs 2.27 trillion. Among these are the airport's expansion and housing projects. Failure to deliver on these, Raila was to reimburse Jimmi some Kshs10 billion used for his Presidential Campaign plus interest- money the former does not have. And since he was not the tenant at State House, he had no way of paying.
Any astute businessman cuts his losses by either letting go of unnecessary baggage or abandoning some projects.  
Jimmi chose to cut losses and do some business. And he said as much in his Twitter handle on March 10.Among other things, he said "Astute Businessmen have Permanent interests, not Permanent enemies"  A lot was at stake: All major constructions contracts in this country will be implemented during Uhuru’s tenancy at stake House as part of his "big four" agenda. That meant that even if Raila won in 2022, there will be nothing left for Jimmi. He had to move fast. 

What a finer way than to force an amity that could pave the way for him to do business? Anarchy was draining his resources with no viable source to replenish them.

The second runway at JKIA is estimated to cost almost what the Greenfield terminal cost –in the upwards of US$356 million. A ten percent cut comes to US$36 million, a huge plug on the hole punctured by political campaigns- and that from only one project! Two more of that magnitude in the next five years and he would be back where he was, if not ahead. So why not let go and move on? Add a few housing projects to the bargain and the dividends of an armistice were mouth -watering.

The old adage goes, if you can’t beat them, join them. So JW the "father of political patronage" decided to follow his “permanent interest”- making money by embracing his old foe, Uhuru Kenyatta. Here, JW was smart.

All he needed was to order his troops “to ceasefire and offer the Olive branch.” The result: armistice! All guns silent. Suddenly everything that NASA stood for – Resist, Secession, NRM, People’s Assemblies, People’s President, evaporated. We are back to abnormal- No strikes, No street demos, no bloodshed, nothing. That is the abnormal Kenya.

 Only JW can achieve that, after all, he bankrolled the troops and all he needed was to call back his debt and they all go on their knees like the biblical slave. Jimmi is credited for cobbling together NASA, an amalgamation of disparate tribal chiefs glued together by their ambition to occupy the house on the hill. By cobbling them together, he hoped they can marshal sufficient numbers to oust the current tenant.
They failed and were likely to drag him down with them. And only he could offer them –and himself-a lifeline.
JW: When Police Paid him a courtesy call
 For Uhuru, such that was a heaven send opportunity he could not let pass. He has his "Big Four" agenda which he hopes will be his legacy particularly building one million houses and building roads and railways. The Ceasefire presented him with an opportunity to deliver on his promises with little disruption. So what the Heck. Shake the devil’s hand and get down to business!
To deliver on his promises, he needs even the devil to play his part. Some of these guys can mobilize resources from somewhere to do some of the projects. So why not let them do it? Astute presidents don’t have permanent enemies, only interests. Here was a congruence of interests, a proper fit. We are all Kenyans so let’s develop our country, let each bring his peg to do that. Bingo! An armistice was born!
 For the hustler, this was his game. Ever the schemer, the son of a peasant from Sugoi has his road to the House on the Hill paved with gold.  For the next five years, he shall traverse the country, cobble together his team without some hooligans throwing stones at him. It is his to lose.
 Where does that leave the country? The first thing to die was the exclusion mantra. Now infrastructure projects-  10,000 Kms of roads,  some 600Km of a railway line, ports, 57 water dams, one million new affordable houses, can be built anywhere in Kenya without political sabotage. Construction of infrastructure is one of the most inclusive investments. It not only creates direct jobs, it also removes barriers to personal and community development. All weather roads, for instance, bring far away markets near.
Businessmen make profits and create more jobs. So if the 10,000Km road network is developed in the next five years, they will create jobs for all and sundry. This is the time for us all to eat. Kenya may live to cherish that handshake at Harambee house last Friday for a long time as the economy picks the cue and steams ahead.
 Should we expect to hit 10 percent GDP growth rate by 2022?  Only time will tell. But don’t be surprised if you found yourself there.


Tuesday, 13 March 2018

Kenya's growth rate to hit 5.8 percent in Q1


Kenya's PMI March'17-March'18
Courtesy CFC Stanbic
The Kenyan economy will post a 5.8 percent growth rate by the end of March and continue the same robust trend to the end of the year, experts say.  
This comes after a lean eight months of 2017. The period between  March and November last year, Kenya experienced a lean period we can report. Drought, coupled with political rumbling in the run-up to the August 8th general election slowed economic activity in the country.

According to CFC Stanbic, the PMI index declined constantly since March 2017 when it read 48 until October when presidential elections were held. In October, it read 34.4, the lowest level in a long time. The decline in PMI mirrors the decline in economic activity in the private sector. No wonder many companies are issuing a profit warning. The decline in profitability has also hit tax- collection putting the government in the red.

 However, Kenya’s economic recovery has picked up the pace, international research groups say. The first pointer to the robust recovery is the PMI, the Purchase Manager's Index, which says that the PMI for February rose to 54.9, the fastest growth in 20 months.

 The PMI is a composite measure of economic performance month-on-month covering 400 firms in Kenya’s private sector. It measures a weighted change in such variables as; New Orders  which is  weighted at  0.3, Output  at  0.25, Employment at  0.2, Suppliers’ Delivery Times at  0.15, Stock of Items Purchased at  0.1
 A reading above 50 shows growth in economic activity while a reading below 50 projects a decline.
According to CFC Stanbic, Kenya’s PMI turned north after the October Presidential elections, rising from a seasonally adjusted reading of 34.4 in October to 42.8 in November before crossing the Rubicon in December to close at 53. Since then it has been on the rise settling at 54.9 in February.

 The report attributes the rise after eight months of decline to the end of the electioneering period and the swearing of President Kenyatta for his second term. The decline in the risk of violence opened the purse-strings both in Kenya and overseas resulting in rising demand for local goods.

The report does not project the future but its survey found some latent demand, an indication that the growth trajectory is here to stay. Even then, analysts say, that it points to a robust growth this year.
The Economist Intelligence Unit for instance, projects a growth of 5.3 percent this year which is in the range of projections by other analysts whose projection range from 5.3 to 6.0 percent.  The Economic Focus group predicts a growth of 5.3 this year.
Agriculture: suffered from prolonged drought
  
The trading Economics Group projects a quarterly growth rate of 5.8 percent in Q1; 5.5 in Q2; 5.6 percent in Q3, closing the year at 6.5 percent in Q4. In short, Kenya will post robust economic growth this year, marking a major turnaround from eight months of poor growth.
 The poor growth, caused by among others factors, the long drought which made agriculture’s fortunes lean, and uncertainty due to political rumbling ahead of the elections last year. The lean times resulted in many firms in the private sector, especially those listed on the Nairobi Stock Exchange, issuing profit warnings. Retrenchment was also reported in those lean eight months.

The overall effect was lower tax -collection for taxes are collected from year-end trading profits. Consequently, the tax collector, the Kenya Revenue Authority, missed its revenue targets, punching a hole in the government’s kitty for the current financial year, ending on June 31st. As at the time of writing, some civil servants are yet to receive their February salaries due to cash flow issues at the treasury. Counties are yet to receive their remission from the treasury.
The lean times are likely to continue until the end of the current financial year in June, though the recently floated Eurobond 2 is likely to save the situation. The money, however, was not meant to recurrent expenditure.

 Despite the lean times, however, analysts are upbeat that the economy will post a robust growth, create jobs and raise tax revenue targets. This is mainly because the economy is well diversified, meaning it does not depend on one sector for growth.
The ongoing construction of mega projects is said to be one of the sectors driving growth in Kenya.  An expected turn around in the Kingpin of the economy, “agriculture supported by good rains, and an upturn in investment should bump up growth this year,” says the Economics Focus group, a view supported by the AFDB in its Kenya’s outlook which projects a 5.6 percent growth rate this year.

AfDB expects the services sector to continue leading the growth because, Kenya is the hub of ICT, Financial and logistics services in East Africa. It states that the continued investment in Rail and roads and the construction of the second runway at Jomo Kenyatta International airport will be a short in the arm for economic performance this year.